# EUR-Lex - 52013PC0348 - EN

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# 52013PC0348

**Proposal for a COUNCIL DIRECTIVE amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation /* COM/2013/0348 final - 2013/0188 (CNS) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

1.           In recent years, the
challenge posed by tax fraud and tax evasion has increased considerably and has
become a major focus of concern within the European Union and worldwide.
Billions of euros are being lost. By reducing fraud and evasion Member States could
increase tax revenues which would also provide them with added scope to
restructure their tax systems in a way that better promotes growth as outlined
in the 2013 Annual Growth Survey. In addition, given the order of magnitude of
the challenge, stepping up the fight against tax fraud and evasion is not only
an issue of revenue, but also of fairness. Particularly in these difficult
economic times, honest taxpayers should not suffer additional tax increases to compensate
for revenue losses incurred due to tax fraudsters and evaders.

2.           For years, the European
Union (EU) has been working actively on these problems, in particular by adopting
specific legal instruments to implement automatic exchange of information ("AEOI")
within the Union. The EU Savings Directive (the "EUSD") ensures AEOI on
interest income and a proposal to enlarge its scope is under discussion in the
Council. The Directive on Administrative Cooperation (the "DAC")
ensures that, from 2015, Member States will exchange information automatically
upon availability on five categories of income and capital: employment,
directors' fees, life insurance products not covered by other Directives,
pensions and ownership of and income from immovable property.

3.           Member States have now
expressed a clear wish to go beyond current levels of cooperation. The European Council of 2 March 2012 invited the Council and the
Commission to develop rapidly concrete ways to improve the fight against tax
fraud. On 6 December 2012, the Commission presented an Action plan to
strengthen the fight against tax fraud and tax evasion[1]. The Action Plan highlights the
need to promote AEOI as the European and international standard of transparency
and exchange of information in tax matters. On 14 May 2013, the ECOFIN Council
adopted conclusions welcoming the work by the Commission on developing measures
to combat tax fraud, tax evasion and aggressive tax planning and recognising
the useful role the Commission Action Plan can play in this regard[2].

4.           The
European Council on 22 May 2013 went even further, requesting the extension of
AEOI at EU and global levels with a view to fighting against tax fraud, tax
evasion and aggressive tax planning. On that occasion, the Commission committed
itself to proposing amendments to the DAC in June 2013 in order to expand the
scope of AEOI, in anticipation of the revision of the DAC already foreseen for
2017.

5.           The objective of the
present proposal is, therefore, to expand the scope of AEOI in the EU beyond
that provided for in existing EU automatic information exchange arrangements.
It would bring the following other items within the scope of the AEOI:
dividends, capital gains, other financial income and account balances. The
provision for a review and expansion of the DAC in 2017 would remain. However, in
line with the objective of enhancing AEOI the removal of the condition of
availability would now be considered at that time in respect of all five
existing categories together so that the DAC would cover the full range of
income. Furthermore, the categories to be considered for inclusion at that time
would be amended in the light of the present proposal (see below). Extending
the scope of the AEOI would also contribute to ensuring equality of treatment
between different types of assets and to avoiding undesirable reallocation of
portfolios.

6.           The Commission proposes to
remove the reference in Article 8(3) of the Directive to a threshold below
which a Member State may not wish to receive information from other Member
States. Discussions have revealed that such a threshold is not practical for
the Member States that are required to report. However, a Member State could continue to opt not to receive any information on a particular category of income.

7.           An EU initiative is needed
both from an internal market perspective and in terms of efficiency and
effectiveness:

–
An EU initiative ensures a coherent, consistent
and comprehensive EU-wide approach to AEOI in the internal market. It would mean
a single reporting approach across Member States which would lead to costs
savings both for tax administrations and economic operators (see also point 11
below).

–
An EU legal instrument would also ensure
certainty for tax administrations and economic operators within the EU.

–
An EU legal instrument would contribute to the
development of the international standard of AEOI.

–
An EU legal instrument based on the DAC would involve
the use of the IT arrangements already in place or under development to
facilitate information reporting under the EUSD and the DAC. Under those
Directives, EU Member States share information in specific formats using a
specific communication channel (the CCN/CSI system). These formats could easily
be extended so as to be usable also for the additional items now proposed for
inclusion. As Member States have invested considerable time and money in
developing these formats, there would be economies of scale if Member States
also exchanged information on the new items using these formats.

–
Furthermore, the Council already committed
itself, in Article 8(5) of the DAC, to consider in due course whether automatic
information exchange should be extended, on the basis of an EU-wide legal
instrument, to cover other categories of income such as dividends and capital
gains. The present proposal is, therefore, merely accelerating work in line
with this commitment.

8.           The agreements that many
governments have concluded or will conclude with the US as regards the US
Foreign Account Tax Compliance Act (FATCA)[3]
have given further impetus to AEOI as a way of combating tax fraud and evasion.

9.           On 9 April 2013, France, Germany, the United Kingdom, Italy and Spain announced plans for a pilot action on AEOI using
the FATCA model agreed with the US as a basis. These Member States also called on
 Europe to take a lead in promoting AEOI in the world and expressed the wish to
discuss how progress could be made within the EU on improving tax information
exchange between all Member States.

10.         Article 19 of the DAC
states that a Member State that provides wider cooperation to a third country may
not refuse to provide such wider cooperation to any other Member State wishing to enter into such mutual wider cooperation with that Member State. The fact that Member States have concluded or will conclude agreements with the US as regards FATCA means that they provide for a wider cooperation within the meaning of
that provision.

11.         Expanded AEOI on the basis
of an EU-wide legislative instrument would remove the need and incentive for
Member States to invoke Article 19 of the DAC, with a view to concluding
bilateral or multilateral agreements that may be considered appropriate on the
same subject in the absence of relevant Union legislation. The scenario of
various agreements concluded under that provision would, in fact, present a
number of disadvantages, compared to a solution brought about by EU action:

–
The level playing field between the Member
States might be put at risk if Member States agreed to cooperate on increased
AEOI in different ways. This could lead to distortions and artificial flows of
capital within the internal market.

–
If the agreements between Member States were not
identical, this could also create difficulties for economic operators that are
active in several Member States as they could then face different compliance
requirements in different Member States.

–
It might also mean that Member States would not
be able to utilise the IT reporting systems that have been developed within the
EU (see above).

12.         Timely adoption and
implementation are crucial so as to reap the benefits as quickly as possible. In
order to ensure consistency with the deadline for the application of AEOI to
the categories of income and capital already covered by the DAC, the time
limits proposed for transposition and application of the new rules are 31
December 2014 and 1 January 2015, respectively.

2.           RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS

In addition to the discussions held in the
Council of Ministers since April 2013 (see above under item 1), the Commission
held a technical meeting with Member States on 21 May 2013 to confirm the need
for a legislative proposal and to discuss its practical modalities and content.

The discussions revealed that Member States
generally supported the need for enhancing automatic information exchange and
for accelerating the extension of the scope of Article 8 of the DAC as already
envisaged in Article 8(5).

Most Member States wish to take speedy
action to increase AEOI but uncoordinated action by Member States on this
matter could lead to potentially lasting fragmentation in the internal market.
It has, therefore, become exceptionally urgent to provide for a consistent and
coherent EU legal framework; for this reason, no impact assessment has been
prepared.

The European Parliament adopted a resolution
on 21 May 2013[4],
whereby it welcomes the Commission Action Plan and its Recommendations, urges
Member States to follow up their commitments and embrace the Commission's
action plan, as well as emphasises that the EU should take a leading role in
discussions on the fight against tax fraud, tax avoidance and tax havens and,
in particular, in relation to the promotion of automatic exchange of
information.

The European Economic and Social Committee
also adopted an opinion on 17 April 2013[5].
The Committee endorses the Commission's Action Plan and supports its efforts to
find practical solutions as regards reducing tax fraud and tax evasion. In
particular, it supports in points 4.6 and 4.7 the Commission's initiatives as
regards the improvements in relation to the AEOI.

3.           LEGAL ELEMENTS OF THE PROPOSAL

The proposal aims at modifying Article 8
of the current DAC. The modifications are contained in Article 1 of the
proposal.

The first modification concerns paragraph
3 of Article 8. The proposal is to remove the reference to a threshold
below which a Member State may not wish to receive information from other
Member States. Discussions with Member States revealed that such a threshold is
not practically manageable. In addition, it is proposed to insert the expression
"one or several of" before the term "the categories"; this
would prevent misunderstandings in a case where a Member State indicates that
it does not wish to receive information on one or several categories of income
and capital referred to in paragraph 1 even if it does want to receive
information on others.

It is proposed to introduce, by way of a
new paragraph 3a of Article 8, automatic exchange of information for dividends,
capital gains, any other income generated with respect to the assets held in a
financial account, any amount with respect to which the financial institution
is the obligor (i.e. is legally or contractually obliged to pay) or the debtor,
including any redemption payments, and account balances. These additional items
relate to income paid directly or indirectly to beneficial owners who are natural
persons, as defined by Article 3(11)(a) of Directive 2011/16/EU, or capital held
directly or indirectly by such persons. It is not proposed to extend to the new
items the existing condition provided for in Article 8(1) in respect of income
currently included in the Directive, which is that the information only has to
be exchanged if it is "available". Information about those new items
will certainly be available as financial intermediaries will be required to
report it to tax administrations under the agreements that Member States have
concluded or will conclude with the US as regards FATCA.

Regarding paragraph 5 of Article 8, the
following changes are proposed:

–
In the first subparagraph, a reference is made to
the new paragraph 3a and the review of the condition of availability will concern
all five categories listed in paragraph 1 (instead of only three of them);

–
In point (b) of the second subparagraph, the
reference to "dividends and capital gains" as matters to be
considered for future addition to the Directive is removed as these categories
are now added in the new paragraph 3a; "other categories and items, including
royalties" (royalties is already quoted in the existing text) is substituted
so as to leave more open the scope of a new proposal in 2017.

Article 2 contains
the usual provision compelling Member States to transpose the Directive. The
time limits proposed for transposition and application of the new rules are 31
December 2014 and 1 January 2015 respectively, in order to align them with the dates applicable in respect of the
categories of income and capital included in Article 8.1 of the existing Directive.

4.           BUDGETARY IMPLICATION

The proposal does not entail budgetary
implications. This applies in particular in regard to the use of IT tools,
since the tools under development will also be used for the implementation of
this Directive.

2013/0188 (CNS)

Proposal for a

COUNCIL DIRECTIVE

amending Directive 2011/16/EU as regards
mandatory automatic exchange of information in the field of taxation

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 115 thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Parliament[6],

Having regard to the opinion of the
European Economic and Social Committee[7],

Acting in accordance with a special
legislative procedure,

Whereas:

(1)       In recent years, the
challenge posed by tax fraud and tax evasion has increased considerably and has
become a major focus of concern within the Union and at global level.
Unreported and untaxed income is considerably reducing national tax revenues. An
increase in the efficiency and effectiveness of tax collection is therefore
urgently needed. The automatic exchange of information constitutes an important
tool in this regard and the Commission in its Communication of 6 December 2012
containing an Action plan to strengthen the fight against tax fraud and tax
evasion[8]
highlighted the need to promote vigorously the automatic exchange of information
as the future European and international standard for transparency and exchange
of information in tax matters. The European Council on 22 May 2013 requested the
extension of automatic information exchange at Union and global levels with a
view to combatting tax fraud, tax evasion and aggressive tax planning.

(2)       Council Directive
2011/16/EU of 15 February 2011 on administrative cooperation in the field of
taxation and repealing Directive 77/799/EEC[9]
already provides for the mandatory automatic exchange of information between
Member States on certain categories of income and capital. It also establishes a
step-by-step approach to reinforcing automatic exchange of information by its
progressive extension to new categories of income and capital and the removal
of the condition that the information only has to be exchanged if available.

(3)       As highlighted by the
request of the European Council, it is appropriate to bring forward the
extension of automatic information exchange already envisaged in Article 8(5)
of Directive 2011/16/EU. A Union initiative ensures a coherent, consistent and
comprehensive Union-wide approach to the automatic exchange of information in
the internal market which would lead to cost savings both for tax
administrations and economic operators.

(4)       The fact that Member
States have concluded or have expressed an intention to conclude agreements with
the United States of America relating to its legislation on Foreign Account Tax
Compliance (commonly referred to as "FATCA") means that they are providing
or will provide for a wider cooperation within the meaning of Article 19 of
Directive 2011/16/EU, and are or will be under an obligation to provide such
wider cooperation to other Member States as well.

(5)       The conclusion of parallel
and uncoordinated agreements by Member States under Article 19 of Directive
2011/16/EU would lead to distortions that would be detrimental to the smooth
functioning of the internal Market. Expanded automatic information exchange on
the basis of a Union-wide legislative instrument would remove the need for
Member States to invoke that provision, with a view to concluding bilateral or
multilateral agreements that may be considered appropriate on the same subject
in the absence of relevant Union legislation.

(6)       The scope of Article 8 of
Directive 2011/16/EU, should be extended to include the following items covered
by FATCA and related agreements by Member States: dividends, capital gains,
other financial income and account balances, which are paid, secured or held by
a financial institution for the direct or indirect benefit of a beneficial
owner who is a natural person resident in other Member States.

(7)       The condition that
automatic exchange may be subject to the availability of the information
requested as provided for in Article 8(1) of Directive 2011/16/EU should not
apply to the new items as information about those items must necessarily be
made available by financial intermediaries to tax administrations under the
agreements with the United States as regards FATCA.

(8)       The reference to a
threshold in Article 8(3) of Directive 2011/16/EU should be removed since such a
threshold does not appear to be manageable in practice.

(9)       The review of the
condition of availability to be undertaken in 2017 should be extended to all
the five categories referred to in Article 8(1) of Directive 2011/16/UE, so that the case for exchange of information by all Member States on
all those categories be examined.

(10)     This Directive respects the
fundamental rights and observes the principles which are recognised in
particular by the Charter of Fundamental Rights of the European Union.

(11)     Since the objective of this
Directive, namely the efficient administrative cooperation between Member
States under conditions compatible with the proper functioning of the internal
market, cannot be sufficiently achieved by the Member States and can therefore,
by reason of the uniformity and effectiveness required, be better achieved at
the level of the Union, the Union may adopt measures, in accordance with the
principle of subsidiarity as set out in Article 5 of the Treaty on the European
Union. In accordance with the principle of proportionality, as set out in that
Article, this Directive does not go beyond what is necessary in order to achieve
that objective.

(12)     Directive 2011/16/EU should
therefore be amended accordingly,

HAS ADOPTED THIS DIRECTIVE:

Article 1

Article 8 of Directive 2011/16/EU is
amended as follows:

(a) Paragraph 3 is replaced by the following:

“3.     The competent authority of a Member State may indicate to the competent authority of any other Member State that it does not
wish to receive information on one or several of the categories of income and
capital referred to in paragraph 1. It shall also inform the Commission thereof.

A Member State may be considered as not wishing
to receive information in accordance with paragraph 1, if it does not inform
the Commission of any single category in respect of which it has information
available."

(b) After paragraph 3, the following paragraph
is inserted:

“3a.    The competent authority of each Member
State shall, by automatic exchange, communicate to the competent authority of
any other Member State, information regarding taxable periods as from 1 January
2014 concerning the following items which are paid, secured or held by a
financial institution for the direct or indirect benefit of a beneficial owner
who is a natural person resident in that other Member State:

(a)
dividends;

(b)
capital gains;

(c)
any other income generated with respect to the
assets held in a financial account;

(d)
any amount with respect to which the financial
institution is the obligor or debtor, including any redemption payments;

(e)
account balances.

The first subparagraph shall not apply to the
extent that the exchange of information at issue is ensured by paragraph 1 or
by any other Union legal instrument."

(c) Paragraph 5 is replaced by the following:

“5.     Before 1 July 2017, the Commission
shall submit a report that provides an overview and an assessment of the
statistics and information received, on issues such as the administrative and
other relevant costs and benefits of the automatic exchange of information, as
well as practical aspects linked thereto. If appropriate, the Commission shall
present a proposal to the Council regarding the categories and the conditions
laid down in paragraph 1, including the condition that information concerning
residents in other Member States has to be available, or the items referred to
in paragraph 3a, or both.

When examining a proposal presented by the
Commission, the Council shall assess further strengthening of the efficiency
and functioning of the automatic exchange of information and raising the
standard thereof, with the aim of providing that:

(a) the competent authority of each Member
State shall, by automatic exchange, communicate to the competent authority of
any other Member State, information regarding taxable periods as from 1 January
2017 concerning residents in that other Member State, on all categories of
income and capital listed in paragraph 1, as they are to be understood under
the national legislation of the Member State communicating the information;

(b) the lists of categories and items laid down
in paragraphs 1 and 3a be extended to include other categories and items, including
royalties"

Article 2

1.           Member States shall adopt
and publish, by 31 December 2014 at the latest, the laws, regulations and
administrative provisions necessary to comply with this Directive. They shall
forthwith communicate to the Commission the text of those provisions.

They shall apply those provisions from 1
January 2015.

When Member States adopt those provisions, they
shall contain a reference to this Directive or be accompanied by such a
reference on the occasion of their official publication. Member States shall
determine how such reference is to be made.

2.           Member States shall
communicate to the Commission the text of the main provisions of national law
which they adopt in the field covered by this Directive.

Article 3

This Directive shall enter into force on
the twentieth day following that of its publication in the Official Journal
of the European Union.

Article 4

This Directive is addressed to the
Member States.

Done at Brussels,

For
the Council

The
President

[1]               COM(2012)722 final.

[2]               Council Conclusions on tax fraud and tax evasion of
14 May 2013 (doc. 9549/13 – FISC 94 – ECOFIN 353).

[3]               http://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx

[4]               European Parliament Resolution of 21 May 2013 on
fight against tax fraud, tax evasion and tax havens (Kleva Report) –
2013/2025(INI).

[5]               European Economic and Social Committee Opinion of 17
April 2013 on the Communication from the Commission to the European Parliament
and the Council - An action plan to strengthen the fight against tax fraud and
tax evasion COM(2012) 722 final (Dandea Report) – CESE 101/2013.

[6]               OJ C , , p. .

[7]               OJ C , , p. .

[8]               COM(2012)722 final.

[9]               OJ L 64, 11.3.2011, p.1.